News

The World awaits the USA interest rate announcement on Thursday; many are expecting a hike of 0.25%, the first rise in 9 years. This is unsettling markets Worldwide, many believing it is still too early. The difficulty in judging, is interest rates are used to tinker with the economy 6 to 12 months in advance, so it depends where the Americans see their economy in a years’ time. My personal view is it is still too early, but we will have to leave that decision to Obama. On the positive side, if rates where to go up it would be a strong indication that the World has finally shaken of the effects of the worst banking crisis in history and worst recession since the 1930s. I don’t believe it has, yes we are on the mend, but not ready for the recovery to be dampened down.
The numbers are clear:

Each Country measures inflation in their economy differently, we use the Consumer Price Index, currently sat at zero.
The Germans use Economic Sentiment, which is down and the Americans use Core retail sales which is down but never the less in the positive.
So I would say we are not fixed, but are on the mend, but nowhere near ready for a rate hike.
Another measure in the UK is what the National Savings Rate is, and they have just announced a rate cut for their ISA products. In one sense this is good news, it means the Government is borrowing less, but it also indicates their long term view of interest rates, LOW.
Another indicator is the price of energy,
       Oil held below $45 a barrel before US government data forecast to show crude stockpiles expanded for a third week in the world’s biggest oil consumer. It is thought the US shale production is still profitable at $40 a barrel, so we could see the price fall further.
       America’s shale gas boom hasn’t exactly been booming lately. Natural gas production from the seven largest US shale deposits will drop for a fourth straight month in October to average 44.784 billion cubic feet a day, the lowest since March, based on an Energy Information Administration forecast released on Monday. That’s the longest streak of monthly declines in government data going back to 2007.
       Finally Bank lending, although mortgage lending is up on last year it is still woefully low, to the extent that banks are in grave danger of missing last year lending targets never mind this years. I guess we can expect to see a surge in lower rate mortgage products leading up to the end of the year. This can only be good news for the housing sector.
       We still see a lot of activity at the lower end and very little at the top, the market is now creeping up with a number of sales over £400,000. With the Banks keen to lend, I believe this trend will continue. My concern still lies at the top end, and Land and Buildings Transaction Tax (the old stamp duty). The high end property is normally bought by business people coming to Scotland. There is now no incentive for them to do that, indeed they get punished if they do, better to buy in North England and take their business elsewhere. Hopefully sometime soon the Scottish Government will learn from that and the falling oil price which is not likely to recover for many years.
        We keep trying!
      Bill Reid BEM BA NAEA DipPFS